AT&T Declines 13.9% in Six Months: How to Play the Stock?
AT&T, Inc. T has declined 13.9% in the last six months compared with the Wireless National industry’s growth of 104.6%. The stock has underperformed the Zacks Computer & Technology sector and the S&P 500’s growth during this period.
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Among its peers, the company has underperformed Verizon Communications Inc. VZ but outperformed T-Mobile, US, Inc. TMUS. Verizon has declined 7.1%, while T-Mobile has lost 19%.
Stiff Competition, Legacy Declines and Debt Burden Are Concerns for T
The U.S. wireless market remains highly competitive, with carriers using promotions and incentives to attract and retain customers. AT&T’s postpaid phone ARPU rose in the second quarter. However, spending on promotions reduces the benefits from pricing actions to some extent. Competition is intensifying in all the verticals of the telecommunications industry. Fiber, fixed wireless and cable providers are targeting many of the same customers. Companies like Verizon are rapidly expanding their fiber infrastructure nationwide. This trend is making it harder for AT&T to monetize subscriber growth. T-Mobile is also modernizing its 5G infrastructure nationwide.
Amid this backdrop, AT&T must continue spending heavily on fiber, wireless infrastructure and spectrum to improve customer service and gain a competitive edge. However, the company had $144 billion of total debt and a net debt-to-adjusted EBITDA ratio of 2.68X at the end of the second quarter. Management expects leverage to rise to roughly 3.2X following the EchoStar transaction before moving back toward its 2.5X target over time. At the same time, AT&T plans annual capital investment of $23-$24 billion and approximately $10 billion in share repurchases during 2026. This leaves very little room for the company to absorb weak operating performance induced by market volatility and macro headwinds.
AT&T is in the process of retiring its copper-based network, which is reducing revenue from its Legacy business. In the second quarter of 2026, Legacy revenues declined 25.9% year over year, while operating income fell 45.5% to $523 million.
Fiber Expansion, Wireless Growth and Convergence Remain Key Drivers
AT&T is expanding its fiber footprint while combining broadband and wireless services to increase customer engagement. In the second quarter of 2026, the company added 367,000 fiber customers and 279,000 fixed wireless customers, while Advanced Home Internet revenues increased 27.3% year over year. AT&T had reached 38.6 million fiber locations and plans to exceed 40 million by the end of 2026 and 60 million by 2030.
AT&T’s convergence strategy is gaining traction. By combining wireless and home Internet services, the company is creating more cross-selling opportunities and increasing customer lifetime value. T reported that 42.5% of its advanced home Internet customers had an AT&T wireless plan, supporting the growth of bundled services.
The company continues to benefit from growth in its wireless subscriber base. It added 432,000 postpaid phone customers in the second quarter, while postpaid phone churn remained low at 0.86%. Expansion into underpenetrated customer segments, greater adoption of converged services and pricing actions are supporting this growth.
AT&T is continuing to modernize its wireless network, with the program reported as more than 60% complete in August 2026. The company is also deploying newly acquired 600 MHz spectrum to improve network capacity, coverage and reliability, including in indoor and rural locations. These investments are intended to strengthen the performance of AT&T’s wireless network and drive customer addition in the long run.
Estimate Revision of T
Earnings estimates for AT&T have moved down 1% to $2.33 and 0.4% to $2.56, respectively, for fiscal 2026 and fiscal 2027, over the past 60 days.
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Key Valuation Metric of T
From a valuation standpoint, AT&T appears to be trading relatively cheaper compared to the industry and trading below its mean. Going by the price/earnings ratio, the company's shares currently trade at 9.76 forward earnings, lower than 37.1 for the industry.
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End Note
Despite AT&T’s efforts to drive customer addition through pricing actions, network upgrades and bundled offerings, stiff competition will likely force T to spend on promotion. It has significant capital requirements for fiber, wireless and spectrum to maintain its competitive edge. Elevated debt obligations make it difficult for the company to match its substantial capital requirements. However, fiber expansion, wireless subscriber growth and convergence strategy will likely offset some of the negative factors. Ongoing 5G modernization and additional spectrum should support network capacity and coverage. AI and edge computing can open up new revenue generation opportunities for the company. With a Zacks Rank #3 (Hold), AT&T offers a relatively balanced outlook, suggesting that new investors should approach the stock cautiously. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
